Peter Lynch, a renowned investor and former fund manager of the Magellan Fund at Fidelity Investments, achieved a legendary compound annual return of 29% during the 1980s.
What Happened: In a 1997 speech, Lynch shared key principles from his 25-year career that guided his success. He emphasized that these principles were timeless, applicable then, now, and for decades to come. Below are three of his essential investing lessons.
Lynch advises against bias towards specific stocks or industries. He emphasizes that great investment opportunities can be found in unexpected places, including companies facing bankruptcy or skepticism.
“There are great stocks everywhere, even those in bankruptcy or close to it. Often times great investments are the ones where everyone else will think you are crazy,” Lynch said during his speech.
Lynch recommends documenting the reasons for purchasing a stock. If those reasons no longer apply due to changes in the company’s story, it may be time to sell. “When the story changes, the investment thesis changes,” he asserts.
A critical point Lynch underscores is that a stock dropping significantly doesn’t mean it won’t fall further. “Stocks can always go lower,” he warns, citing the example of Polaroid, which plummeted from $140 to $18 over nine months. He also cautions against assuming stocks will rebound solely because they’ve declined.
“Stocks also don’t have to bounce back just because they went down,” he added.
Why It Matters: These principles highlight Lynch’s disciplined and thoughtful approach to investing, which continues to inspire investors today.
Lynch’s principles offer timeless guidance for investors at all levels, from beginners to seasoned professionals. His focus on deeply understanding the business, prioritizing individual stock analysis, and exercising patience mirrors the strategies of legendary investors like Warren Buffett.
These insights serve as a powerful reminder that true success in investing comes not from chasing short-term gains but from making well-informed decisions and committing to a long-term
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